A Canadian portfolio manager says the traditional “60/40” portfolio made up of equities and bonds is not working amid elevated inflation, and he has a new framework to suggest for investors.

Robert Wilson, head of portfolio construction consultation services at Picton Mahoney Asset Management, said 60/40 “requires a rethink” in the current inflationary environment, because stocks and bonds “tend to trade in the same direction when there’s an inflation shock.”

Instead, he suggested a “40/30/30” portfolio that takes 20 per cent from equities and 10 per cent from fixed income to include “alternative strategies” such as private credit to build a more “resilient portfolio” that can withstand a more turbulent market environment.

“If you look at a 60/40 portfolio, it's got a good depth of diversification, you own stocks and bonds a bunch of different ways, but it has a relatively poor breadth of diversification,” he said. “You're missing entire asset classes and strategies.”

To watch the full interview with Wilson, click on the video at the top of this article.